Plaintiff accused by Court of deliberately defaulting on debts to create FDCPA claims

The Fair Debt Collection Practice Act (FDCPA), enacted in 1977, aimed to "eliminate abusive debt collection practices.” Among many other reforms, the FDCPA prohibits harassing or oppressive conduct on the part of debt collectors, and it requires debt collectors to provide notice to debtors of their right to require verification of a debt. Both the text of the FDCPA and its legislative history emphasize the intent of Congress to address the previously common and severe problem of abusive debt collection practices and to protect unsophisticated consumers from unscrupulous debt collection tactics. The Act, as a U.S. District court recently stated, was not intended to enable plaintiffs to bring serial lawsuits against different debt collector defendants alleging various and often insignificant deviations from the Act’s provisions.

In Ehrich v. Credit Prot. Ass’n, 2012 U.S. Dist. LEXIS 134142 (E.D.N.Y. Sept. 19, 2012), accused the plaintiff in that case of abusing the FDCPA by, among other things, filing a total of nine complaints, including the present case, over the past seven years. The court stated that the record suggests that the plaintiff may be deliberately defaulting on his debts in order to provoke collection letters which are then combed by his lawyer for technical violations of the FDCPA.

The facts of this unique case are that Ehrich filed a complaint against Credit Protection Association, L.P., alleging violations of the FDCPA. Ehrich alleged that CPA sent him a collection note seeking to recover a debt owed to Time Warner Cable Company. Ehrich did not dispute the validity of the debt CPA sought to collect, nor did he claim that the primary text of the letter violates the FDCPA. Rather, Ehrich based his claim on two Spanish sentences at the top and bottom of the letter.

Printed at the top of the letter is the phrase “aviso importante de cobro,” which Ehrich, relying on a Google translation, translated as “important collection notice.” At the bottom of the collection notice were three Spanish phrases: “Opciones de pago,” “Llame” followed by a phone number, and “Envíe MoneyGram,” which Ehrich translated as “Payment options,” “Call" and “Send MoneyGram.” Ehrich, who does not speak Spanish, claimed that the notice’s inclusion of these Spanish phrases without a Spanish translation of the FDCPA-mandated disclosures and notices provided in English could mislead Spanish-speaking consumers and cause them to inadvertently waive their rights under the FDCPA.

CPA moved for summary judgment which was granted by the court based on lack of standing. The basis for the Court’s ruling was that the collection notice contained all disclosures required by the FDCPA and that Ehrich fully understood it. Therefore, he suffered no injury sufficient to support standing.

Debt Collectors May Seek You Out Via Facebook

Facebook is great for looking up that girl who stole your lunchbox in preschool. Being clever enough on Twitter can land you a book deal. And if you're a debt collector, social media is remarkably helpful in helping you to track down people who haven't paid their bills.

"Between Facebook and LinkedIn—a lot of people show up online in different places. They don't even realize," says Howard Beloff, president of CSRS Collections, a small collection agency in Rockville, Md.

Beloff's company collects on a variety of debts: late rent, medical companies, delinquent private school tuition. In many cases, he says, especially in those of people who have amassed rent bills, these debtors have moved and are hard to find. That's where the investigative work of debt collecting comes in. And in the arsenal of tools at their disposal, debt collectors find social media an immensely helpful addition.

A few decades ago, collectors had to rely old-school tools like the White Pages for basic information on whether a debtor had moved or changed phone numbers. The Internet changed that completely, says Mark Schiffman, spokesperson for ACA International, a trade group of credit and collection professionals.

"From a tech perspective, it's easier access to public information, versus having 50 phone books or 100 phone books in my office," Schiffman says. "Now you have the Internet and people putting information that's publicly available out there. People are putting out a little billboard" for themselves, he says.

That's not all of the help that the Internet affords collectors. Some states put their court records online, and online "skip tracing" sites help agencies find potential addresses for debtors.

It sounds like a lot of avenues to pursue, just to track down where someone lives. But all this online information can be used for much larger purposes. An up-to-date LinkedIn site can give a collector easy information on if and where that person works, says Beloff, which is valuable information for a collection agency that wants to garnish a debtor's wages. In other words, put information—a public Facebook status, a LinkedIn update, a tweet—about getting hired at a new job onto the internet and collectors get a signal that you might have money available.

Simply reading what a debtor has made public on social media is not illegal, and it's hard to argue it's unethical; collectors are simply using available information. Still, there are strict laws ensuring that the investigation goes little further. While a debt collector can look at a debtor's Facebook page, Twitter feed, or LinkedIn listing for information, for example, she can't tweet, message, or even E-mail the debtor with information about outstanding balances.

One collector talks about the difference between acceptable tactics and those that venture into deceptive territory.

"If I were to be a bit surreptitious and if I were to actually try to become your friend on Facebook and you were to accept me as a friend on Facebook, I would get access to all kinds of really, really good information on you," says Bill Bartmann, CEO of Oklahoma-based debt collection company CFS II. That kind of deception, he says, is different from simply Googling or Facebook-searching a debtor.

Schiffman says that while complaints have been filed with the government over the use of social media in collections, he does not believe that the use of social media has led to a spike in complaints. Still, debt collection complaints have risen in recent years, from 128,000 in 2009 to nearly 152,000 in 2010, and again to nearly 181,000 in 2011.

According to data supplied by ACA, debt collections have also grown recently. Collections at third-party debt collectors totaled $44.6 billion in 2010 , up more than $4 billion from 2007, before the crisis, though employment at those firms was down slightly over the same period.

However, the population of debtors to pursue is growing: Roughly one in seven Americans—slightly more than 14 percent—is being pursued by a debt collector, according to the Federal Reserve Bank of New York. That's up substantially from mid 2003, when the figure was around 9 percent. The amount available to collect is up, too, from around $900 per debtor then to over $1,500 now.

While a certain, small percentage of debtors habitually run up bills and neglect to pay them, says Bartmann. the recent economic downturn brought a new population onto the debtor rolls: people not used to being pursued. While some may be facing financial hardship and be unable to pay, there are many others who want to get their debts discharged quickly.

He feels that this new population has, in some ways, made collections easier.

"Are customers more apt to pay now than in previous economic cycles? That answer is yes," Bartmann says.

Still, he advises caution to anyone making too much of their lives public online. His word of advice to debtors: "Be careful what you put out there."

That, he says, or just pay your bills as best you can. Neglecting to pay altogether can make prices higher and credit tougher to get for everyone.

Beloff agrees: "The thing is, is that for anybody who pays their bills, they should hate people who don't."

U.S. News & World Report

By Danielle Kurtzleben

Offer of Judgment Halts FDCPA Lawsuit

Federal Rule of Civil Procedure 68 provides that, at least fourteen days before trial, a defending party may serve a plaintiff with an offer to allow a judgment on specified terms. Several recent district court opinions have rules that an offer of judgment providing the plaintiff with the maximum allowable relief will moot the plaintiff’s FDCPA claim. Moten v. Broward Cnty., No. 10-62398-CIV, 2012 U.S. Dist. LEXIS 19332, 2012 WL 526790, at 2 (S.D. Fla. Feb. 16, 2012); see also Mackenzie v. Kindred Hosp. E., LLC, 276 F. Supp. 2d 1211, 1218-19 (M.D. Fla. 2003) (dismissing FLSA claim as moot after plaintiff rejected Rule 68 offer where offer exceeded amount plaintiff could have received at trial).

In Young v. AmeriFinancial Solutions, LLC, 2012 U.S. Dist. LEXIS 125661 (S.D. Fla. Sept. 5, 2012), plaintiff filed an action against defendant under the Fair Debt Collection Practices Act which provides that damages in an action brought by an individual shall not exceed $1,000.00. Defendant served an Offer of Judgment proposing to have judgment entered in the about of $1,001, plus attorney's fees incurred prior to the date of the offer. The Court granted the defendant’s motion to dismiss for lack of subject matter jurisdiction because the offer of judgment would provide plaintiff with the maximum allowable relief on her claims. Therefore, the court concluded, that the action was moot and the Court would no longer have subject matter jurisdiction over the suit.

For more information about the Fair Debt Collection Practices Act, ot, its state law counterpart, the Florida Consumer Collection Practices Act, visit us at:

• Stop Collection Harassment;
or
• Consumer Rights Orlando

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., imposes civil liability on “debt collector[s]” for certain prohibited debt collection practices. A debt collector who “fails to comply with any [FDCPA] provision . . . with respect to any person is liable to such person” for “actual damage[s],” costs, “a reasonable attorney's fee as determined by the court,” and statutory “additional damages.” § 1692k(a). In addition, violations of the FDCPA are deemed unfair or deceptive acts or practices under the Federal Trade Commission Act (FTC Act), § 41 et seq., which is enforced by the Federal Trade Commission (FTC). See § 1692l. A debt collector who acts with “actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is [prohibited under the FDCPA]” is subject to civil penalties enforced by the FTC. §§ 45(m)(1)(A), (C). A debt collector is not liable in any action brought under the FDCPA, however, if it “shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” § 1692k(c).

Extortion Scam Related to Delinquent Payday Loans

The Internet Crime Complaint Center of the Federal Bureau of Investigation has received many complaints from victims of payday loan telephone collection scams. Callers claim the victim is delinquent in a payday loan and must repay the loan to avoid legal consequences. The callers purport to be representatives of the FBI, Federal Legislative Department, various law firms, or other legitimate-sounding agencies. They claim to be collecting debts for companies such as United Cash Advance, U.S. Cash Advance, U.S. Cash Net, and other Internet check-cashing services.

According to complaints received from the public, the callers have accurate data about victims, including Social Security numbers, dates of birth, addresses, employer information, bank account numbers, and the names and telephone numbers of relatives and friends. How the fraudsters obtained the personal information varies, but in some cases victims have reported they completed online applications for other loans or credit cards before the calls started. 

The fraudsters relentlessly call the victim’s home, cell phone, and place of employment. They refuse to provide any details about the alleged payday loans and become abusive when questioned. The callers have threatened victims with legal actions, arrests, and, in some cases, physical violence if they do not pay. In many cases, the callers harass victims’ relatives, friends, and employers. 

Some fraudsters have instructed victims to fax a statement agreeing to pay a certain amount, on a specific date, via a pre-paid Visa card. The statement further declares the victim will never dispute the debt. 

If you receive these calls, do not follow the caller’s instructions. Rather, you should:

• Notify your banking institutions.
• Contact the three major credit bureaus and request an alert be put on your file.
• Contact your local law enforcement agencies if you feel you are in immediate danger.
• File a complaint at www.IC3.gov.

Tips to avoid becoming a victim of this scam:

• Never give your Social Security number—or personal information of any kind—over the telephone or online unless you initiate the contact.
• Be suspicious of any e-mail with urgent requests for personal financial information. The e-mail may include upsetting or exciting but false statements to get you to react immediately.
• Avoid filling out forms in e-mail messages that request personal information.
• Ensure that your browser is up-to-date and security patches have been applied.
• Check your bank, credit, and debit card statements regularly to make sure that there are no unauthorized transactions. If anything looks suspicious, contact your bank and all card issuers.
• When you contact companies, use numbers provided on the back of cards or statements.

FBI National Press Office